REAL PROPERTY VALUATION

The VOA values property. A simple statement that conceals a wide range of concepts, requirements, solutions, principles and standards. This article will justify a place to start developing the first fundamental requirements of a model production process for valuing property because the VOA is an instance.

Real property: What is it

The statement predicates that there must first be something called property to value. What the statement conceals is that it is referencing a particular definition of property. Specifically, property that is comprised of three dimensions of space over a forth dimension of time. These parameters define a unit of real property, often referred to as simply as “land”. The opportunity for humans to make use of land is what the statement expects to be valued.

The specific starting point for designing a valuation production process therefore, is the formation of temporal spacial units, and the specific context is their valuation.

a bit more detail

Formation is a reference to the gathering and shaping of materials into primitive components. In this case components of valuation.

In the context of valuation, materials is a reference to information. This is because the property itself can not physically form part of a valuation. Only information representing the property can.

In the case of temporal spacial units, information is a reference to the four qualities of temporal spacial units stated above. I.e. The three spacial dimensions and forth temporal dimension that profoundly define every unit of real property, aka “land”.

what’s not always appreciated

In the context of real property valuation, property also includes all matter persisting within the temporal spacial unit. A notion typically represented by the term “fixed”.

That is to say that all matter compelled to remain within the boundaries of the spacial unit throughout it’s duration, forms part of the real property unit also. Such matter is typically referred to as “fixtures”, and includes buildings, structures, fittings, instances of plant and machinery and anything else deemed “fixed to the land”.

The value of such matter to anyone utilising the host spacial unit is greatly impacted by this notion. In the context of valuation, forming temporal spacial units must therefore not only include gathering information about a unit’s temporal and spacial dimensions, it must go on to gather information representing the matter persisting within the bounds of the temporal spacial unit also.

how it’s done

The activity in a valuation production process that gathers and shapes property information into a valuation component is typically referred to as “surveying”; And the structured information that results a “survey”. This makes surveys the first dataset of concern to designers of valuation processes.

However, as appreciated above, surveys are made of two smaller parts. Specifically, the dimensions of a temporal spacial unit and a structured description of fixtures hosted within. Of the two, temporal spacials units must be defined first since they form the context of every description about fixtures therein. Consequently, whilst surveys are a first component, information about temporal spacial units is the first material to gather.

Valuation definitions are devised so as to take into account desirable factors about property and relate those factors in desirable ways to particular purposes. For example, property utilisation, investment or taxation.

Valuation bases are devised so as to make valuations fit for purpose. For example, able to retain the confidence of those who consume them, or demonstrate that a valuation is just, lawful and meets expected standards.

why it matters

Valuation definitions are not devised by designers of valuation processes. They are components of valuation processes that are handed to designers. In contrast, the formation of valuation bases are a direct concern of any designer of a valuation process.

Constructing a basis with which to produce a defined valuation that is fit for purpose requires selecting and processing materials in specified and not merely preferred ways. For example, a property’s value may be determined by reference to:

  • Market transactions of comparable properties; And/or,
  • A flow of income from the property’s use; And/or,
  • The costs incurred acquiring and constructing a comparable property from scratch as an alternative to acquiring an existing ready to use instance.

In all cases, decided valuation law and chartered valuation standards require all valuation bases to properly reference and relate evidence to valued properties in the context of a valuation definition. Since such evidence is itself related to property, relating evidence to valuations requires surveys of the properties to which the evidence relates also.

so here is what to take away

Not only do valuations require a survey of the property to be valued, but to be fit for purpose, valuations require surveys of other properties as well.

Since the first dataset of every survey is of temporal spacial units, then a dataset of temporal spacial units should be the starting point of all designers of valuation production processes.

But since surveys are required for two distinct primary purposes, (i.e. valuation and relating evidence), one subordinate to the other, any dataset of temporal spacial units ought to include primary purpose and relationship.

what next

The VOA values property. But all valuations are made for a purpose. This means that valuation occurs in a bigger set of individual discrete contexts. Each such superior context has a profound effect on valuation definitions and baseis, and consequently on surveys and their pieces.

Therefore, understanding the concept of superior contexts, including those in which the VOA operates, will be the subject of the next blog. Once understood, their impositions on data architecture can be correctly taken into account during design and successfully implemented into each business operation.